A Dubai-based catering tycoon is in talks to invest in a new tabloid newspaper as its founders mount a last-ditch effort to secure millions of pounds in funding.

I have learnt that George Farha, who runs one of the Gulf's biggest hospitality services companies, has been holding discussions with Phoenix Ventures, a vehicle set up to raise cash to enter the Sunday red-top market.

Phoenix has earmarked a deal with Trinity Mirror, the national and regional newspaper publisher, that would involve forming a joint venture to take on the running of the Sunday People.

The founders of Phoenix, who include Sue Douglas, the former Sunday Express editor, want to launch the News of the People, a title with deliberate echoes of the News of the World, which was closed by News International in 2011 as the phone-hacking scandal reached fever pitch.

Trinity agreed in January to the outline of a deal pending Phoenix’s ability to secure funding for the project. Despite interest from a string of prominent tycoons, none has yet stumped up the cash to back Phoenix's plans.

The talks between the new vehicle and Mr Farha are understood to involve G&S, a fund backed by the tycoon.

Trinity had set an Easter deadline for a deal to be reached, with insiders now pessimistic about the prospects of an agreement. One person close to the talks said that the environment for an investment in the tabloid newspaper market had darkened since four current and former Mirror Group Newspapers journalists were arrested last month as part of an investigation into alleged phone-hacking.

Phoenix is set to hold further discussions with Trinity in the coming days, the insider said. While Mr Farha is not the only potential investor with which Phoenix is in talks, he had been viewed by it as the most likely backer.

According to the Farha Holdings website, Mr Farha was educated at Dulwich College and University College London before he founded Intercat, which became one of the biggest industrial catering groups in the Gulf.

Among other entrepreneurs who have held talks about backing Phoenix are Brian Kennedy, the Sale Sharks rugby club owner, and Keith Harris, the football financier whose investment bank, Seymour Pierce, fell into administration earlier this year.

Phoenix has approached a number of candidates about editing its newspaper. One insider said on Monday, however, that Phoenix, which has been trying to raise funds for more than a year, may abandon its efforts if it cannot secure a deal imminently.